Correspondence between

Ed Kurtz and Kevyn Orr spoke this afternoon. Ed indicated that Flint will not accept the last offer from DWSD. His formal letter is attached. | spoke with both (separately) after the call. They both indicated that they had a good conversation, and that they sincerely look forward to working with the other in good faith over the next couple years. Kevyn indicated that he would follow up with Sue McCormack, and that his direction will be that there be no more talking to the press about the issue. Ed plans to stay silent on the deal until Monday, at which time he will address the issue in a matter of fact matter, and stay away from any divisive language regarding the issue.

If Flint is going to go into some kind of regional authority, then we need to firewall the finances of water from the general city budget. How do we keep the city from using the water system as a cash flow tool? We need to help them avoid the problem that they have been guilty of in the past of capturing water monies from customers before remittance to the Authority and using it elsewhere. | suspect that is the motivation behind their desire to split off from DWSD. If the monies go to legacy debt it will help Flint immeasurably, if general fund then they'll never get on top of the situation. Right now their legacy debt is higher than their wages for current employees and that is obviously unsustainable. | realize I'm not telling you anything you don't already know, just re-emphasizing. xxxEND_PAGE:executiveofficeemails21_b0635_1479_1479_1

> > > > Sent from my iPad > > Begin forwarded message: >

Interesting threat here. They will seek to recover sunk costs through rates in last two years. My guess is this will be a wildly huge increase. We cannot ignore the threat. We need legal advice asap. This needs immediate attention. Fred please work with the AG and Valerie.

| thought we had settled all these questions. If so, we need to answer his email with an explanation.

lthink Ed should respond to Moflorrnick. i wouldn't have reacted quite so negatively, but then that’s me. | weudd encourage him te always stress that they are open to new proposals, but haven't seen one. Bul, lm in me position to rewrite emails. i cio think that a clean closure on both sides is warranted. it’s not like KWA wouldn't still need a negotiating posture with CWSD. What was Sue‘s resporise to the request for a last best offer? | take it she wasn’t interested, or at least didn’t feel that she could offar any more than previously done? Schenk’s about as good as you can get in pubic life, so with Sue if they dan‘t have an offer, | can't figure out what we can do more, im really surprised that DW5E hasn’t responded with a final counter, Sounds like the well is pretty poisoned (no pun intended).

Thanks, When should | tell Orr or do yau want to?

Matt Schenk Who did you talk to at [AWSD? We'H need to be able ta grove we went the extra mile on this one. How saan do we tell Grr?

Whe did you talk to at DISD? We'll need to be able to prove we went the extra mile on this one. How soon do we tell Orr?

We haven't heard anything from them, other than a couple letters of opposition. | have asked Mike Brown to let me know if they do hear anything. On Apr 4, 2013, at 6:11 PM, "Muchmore, Dennis (GOV)" <[email protected]>

1 told the Gov about this again today. Let’s make sure we sit on this until Tuesday or so, and do you have a comms plan in place?

Dennis, ‘There is some information attached on the Flint water issue you asked us about. I summarize a few of the key points: e The water system has been running at deficits for years. When the previous EFM left the City in 2004, the water system has a reserve of approximately $60 million. When Mike Brown was appointed, this had turned into a $20 million deficit due to years of not passing along to consumers the rate increases of over 10% hitting the system from DWSD. Slides 5 & 6 of the attached power point show this pretty dramatically. e Substantial increases over the past few years are an attempt to reflect the actual costs of running the system. e Another concern raised by DHS was the increase in the deposit for rental properties. ‘This was necessary because renters paid the previous $100 deposit, then racked up water bills in excess of this amount and walked away. Of the affidavits currently out there, 82°% are past due. I would also note that this is not mandatory, it is only required if a landlord ts not willing to put the water bill in their name. e The bottom line is that they realize it is an issue, but the General Fund doesn’t have the money to run general City operations, much less subsidize water rates. ‘The two page word document (attached) provided by the EFM gives you a good overview of what is going on. ‘They believe that a switch to KW A is part of the solution for high water rates in the City.

Just another example,